Rise in Loan-to-Deposit Ratio
EghtesadOnline: Loan to deposit ratio of banks stood at 81.4% by end of the Iranian calendar month ending Oct. 22, indicating a 1.6% annual rise.
According to the Central Bank of Iran data, the ratio was up 1.2% over seven months since the beginning of the fiscal year and 0.4 percentage points lower on the preceding month.
LDR is used to assess a bank's liquidity by comparing the total loans to total deposits for a specific period and is expressed in percentage.
If the ratio is too high, the bank may not have enough liquidity to cover unforeseen funding requirements. Conversely, if the ratio is too low, the bank may not be earning as much as it should be.
The ratio for Tehran Province, where the capital is located, was 95.3% and 106.2% in the underprivileged Kohgilouyeh-Boyerahmad Province.
Increase in LDR is an indication that banks are willing to lend. As per acceptable norms, the ideal LDR ratio should be 80% to 90%. A ratio of 100% means the bank loaned the same amount it received in deposits. It also means the bank will not have enough reserves for contingencies.
According to a study by the Economy Ministry, bank loans have been unevenly distributed across the provinces.
It was found that LDR of specialized lenders owned by the government was higher and private banks underperformed in giving loans.
Bank customers had 48,394.8 trillion rials ($172.8 billion) in deposits by the end of the seventh calendar month. This was up 45% compared to the same period last year when customers parked 33,380.5 trillion rials ($119.2b) in banks.
As usual the majority of deposits (53.5%) were in banks in Tehran Province, which held 25,891.2 trillion rials ($92.46 billion) in deposits during the mentioned period.
Isfahan Province was next with more than 2,609.06 trillion rials ($9.3 billion). Kohgilouyeh-Boyerahmad Province was at the bottom end with 127.8 trillion rials ($456.4 million).
Total outstanding loans, including performing and non-perfuming loans, rose 11,274.6 trillion rials ($40.2b) to reach 35,470.8 trillion rials ($126.6b) – up 46.6% annually.
Unpaid loans were 27% higher since the beginning of fiscal year that ends in March.